CHASE CORP

On September 1, 2020 (subsequent to fiscal 2020), the Company acquired all the capital stock of ABchimie for €18,000,000 (approximately $21,420,000 at the time of the transaction) net of cash and marketable securities acquired, subject to final working capital adjustment, excluding acquisition-related costs of $274,000 and with a potential earn out based on performance potentially worth an additional €7,000,000 (approximately $8,330,000 at the time of the transaction). ABchimie is a Corbelin, France headquartered solutions provider for the cleaning and the protection of electronic assemblies, with ‎further formulation, production, and research and development capabilities‎. The transaction was funded 100% with cash on hand. The financial results of the business will be included in the Company's fiscal 2021 financial statements within the Adhesives, Sealants and Additives operating segment in the electronic and industrial coatings product line. The Company is currently in the process of finalizing purchase accounting, regarding a final allocation of the purchase price to tangible and identifiable intangible assets assumed and anticipates completion within fiscal 2021. The ABchimie acquisition does not represent a significant business combination so pro forma financial information is not provided.

Chase Corporation emphasized operational and financial discipline in fiscal 2020, a year which continued the macrotrend revenue drag observed in the prior year, and ultimately saw the spread of the coronavirus pandemic (COVID-19) across all geographies served by the Company. Domestic and international top-line headwinds attributable to the pandemic affected all three of the Company’s operating segments, while the prior year tightness in Asian markets persisted. Through this, the Company was able to increase its relative gross margin, complete the consolidation of its pulling and detection operations into its existing Hickory, NC location, liquidate two real estate assets for gains and achieve a year-over-year increase in cashflows from operations.

Cost of products and services sold in our Adhesives, Sealants and Additives segment was $55,902,000 for the fiscal year ended August 31, 2020 compared to $60,345,000 in fiscal 2019. As a percentage of revenue, cost of products and

services sold in this segment was consistent at 58% in both fiscal 2020 and fiscal 2019. Cost of products and services sold in our Industrial Tapes segment was $80,351,000 for the fiscal year ended August 31, 2020 compared to $93,299,000 in fiscal 2019. As a percentage of revenue, cost of products and services sold in this segment decreased to 68% in fiscal 2020 compared to 72% for fiscal 2019. Cost of products and services sold in our Corrosion Protection and Waterproofing segment was $25,362,000 for the fiscal year ended August 31, 2020 compared to $26,519,000 in fiscal 2019. As a percentage of revenue, cost of products and services sold in this segment decreased to 55% in fiscal 2020 compared to 57% in fiscal 2019. As a percentage of revenue, cost of products and services overall decreased primarily due to: (a) production efficiencies recognized, most acutely seen at our Oxford, MA and Lenoir, NC locations following the consolidation of our former Pawtucket, RI cable materials plant, and benefiting our Industrial Tapes segment; (b) more favorable sales mix, most specifically obtained in our Industrial Tapes segment, as our lower margin products constituted a comparatively lower portion of total sales; and (c) the full period effects of price increases the Company instituted during fiscal 2019 (prior year) to address inflation then seen in raw material costs.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, included a technical correction to the Tax Act which will allow accelerated deductions for qualified improvement property. The Company is currently evaluating the impact of the CARES Act, but at present does not expect that the qualified improvement property correction nor other provisions of the CARES Act would result in a material tax benefit to us in future periods. The CARES Act had no material effect on the effective tax rate for fiscal 2020.

During the fourth quarter of fiscal 2019 (prior year), the Company commissioned engineering studies of certain legacy operations, machinery and locations related to the Company’s facility rationalization and consolidation initiative. Chase Corporation completed its review of the data and recommendations provided by the study in the fourth quarter of fiscal 2020 (current year). The Company recognized $200 in expense related to these services in fiscal 2019, and a gain of $170 in fiscal 2020, as certain amounts expensed in fiscal 2019 were refunded. Also in the fourth quarter of fiscal 2020 and related to the recommendations of the commissioned engineering studies, the Company wrote down the value of certain non-operating production assets related to the pipeline coatings product line, within the Corrosion Protection and Waterproofing segment. Given the nature and prospects of the equipment, the Company determined its then carrying value exceeded its fair value and recognized an expense of $405 related to the machinery. The Company may utilize third party engineering, IT and other professional services firms in the future for similar optimization-related work. Given the ongoing nature of the facility rationalization and consolidation initiative, an estimate of future costs cannot currently be determined.